Alright, back on topic.
The advantage of XBox Live is that Microsoft delivered a peer-to-peer network framework where developers could add online multiplayer to their games without bearing the cost of dedicated server infrastructure. Many more games on the 360 has had online multiplayer modes.
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An example is Turn 10 who used peer to peer networking in Forza Motorsport 2, but will have dedicated servers in FM 3 (because they made so much money on FM2)
Cheers
I think that XBL profits alone could easily carry dedicated servers for all somewhat popular online titles. There is 10 million or so XBL gold users? Thats $50 million a month. Lets say worst case scenario: 50% of XBL gold population is online at the same time.
Youd need servers for 5 million people. Each host session can carry 10-32+++ players depending on game. Lets say on average 12. So we need 420 000 servers. (however, most games can easily be hosted in many instances per server with modern pc cpu power and ram amounts, after all these games are designed to be hosted on x360's!) Lets not factor that in, it will be super cheap anyway.
We would need server farms for all continents. Something like: west coast \east coast us. Germany in europe(everybody in europe has 5-100ms ping to central germany if they have a decent connection), Jpn in jpn. Distrubute server amount among regions.
420 000 servers, lets say they each cost $1000 to install and buy (after all we would get a huuuge discount, so this would give us quite decent hardware)
Thats 420 million bucks. Fixed cost, one time investment.
Now lets add bandwith costs: I can rent a dedicated 10mbit cs server for $ 1,24 bucks per player per month (so 12*1,24=$14,88)! 10 mbit upload\download is more than enough to give a lag free experience for 12 players, for any game with a half decent netcode.
Now, since they would have dedicated server farms, the bandwidth they would get would probably be extreme for such a price, so lag wouldn't be a problem anyway. They would also not pay retail for their bandwidth, so it would atleast be half the cost for similar bandwidth. that 0,67$ per player.
5000000*0,67= 3,35 mill per month. Thats nothing. Even if we double the bandwidth cost estimate thats still 6,7 mill per month.
Okay, lets add locale cost.
5 big wearhouses in a city with that can get provided with a huge cable, lets say lease is $400000 a month . 2 mill total per month.
What a good value for maintance per month? Since these farms would be huge, on average 84 000 servers. We would need say 40 people for maintance and running the thing. Lets say on avereage these guys get 50k a year, meaning $ 4 166 per month. times 40*5 =833 333 per month. Lets call it a million per month.
How much is electric on such a farm?
Anyways.
Lets add some stuff up=
Bandwidth 6,7 mill
+Workers\maintance 1 milll +
Locale (looks way high) 2 mill
= 9,7million running cost per month.
A little less than 20% per user on XBL. Before electric.
Lets add some XBL dev costs. This shouldn't be particularly expensive, just a bunch of coders. Lets say 100 of them. 70k a year equals 583 000 per month for all hundred of them.
Now we are at 10,283 000 or 20,56%. per user.
84 000 servers. Lets say one server costs $300 electric per year? That equals 2,1 mill per month.
Let me know if i miss something or should revise some numbers. Also im stoned! so math might be off (calculators are for noobs)
So now we are at 12,383 mill per mill. 0,24766% per user.
Lets see how long this serverfarm installation is payed off.
50*12= 600 million. 600*0,75234=451,4 mill after running costs are payed off.
This covers the initial 451,4 mill after running costs are payed off. Minus server investment = 31,4 mill net profit first year.
420/451,4 = 0,93 *12 = 11.
It would take a little more than 11 months to pay this off.
Microsoft has a AAA rating, allowing them to borrow the 420 million at a yearly cost of 1,33% (LIBOR 1 year fixed no interest risk. 1 year futures for hedging would be cheap aswell). So 420*1,0133=425,586.
After this first year and paying off the debt, XBL GOLD still nets microsoft 75,234%.
I guess its just a matter of greed.